CORVEL CORP

Previous wording

The Company disclaims any obligations to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information or otherwise. Actual future performance, outcomes, and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation): general industry and economic conditions, including a decreasing number of national claims due to a decreasing number of injured workers; competition from other managed care companies and third party administrators; the Company's ability to renew or maintain contracts with its customers on favorable terms or at all; the ability to expand certain areas of the Company’s business; growth in the Company’s sale of third-party administrator (“TPA”) services; shifts in customer demands; increases in general and administrative expense and in operating expenses, including employee wages, benefits and medical inflation; the ability of the Company to produce market-competitive software; cost of capital and capital requirements; the Company’s ability to attract and retain key personnel; the impact of possible cybersecurity incidents on the Company’s business; existing and possible litigation and legal liability in the course of operations and the Company’s ability to resolve such litigation; changes in regulations affecting the workers’ compensation, insurance and healthcare industries in general; governmental and public policy changes, including but not limited to legislative and administrative law and rule implementation or change; the impact of recently issued accounting standards on the Company’s consolidated financial statements; the availability of financing in the amounts, at the times, and on the terms necessary to support the Company’s future business; and the other risks identified in Part II, Item 1A of this report, under the heading “Risk Factors.”

Current wording

The Company disclaims any obligations to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information or otherwise. Actual future performance, outcomes, and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation): general industry and economic conditions, including fluctuations in the number of national claims based on the number of injured workers; competition from other managed care companies and third party administrators; the Company's ability to renew or maintain contracts with its customers on favorable terms or at all; the ability to expand certain areas of the Company’s business; growth in the Company’s sale of third-party administrator (“TPA”) services; shifts in customer demands; increases in operating expenses, including employee wages, benefits and medical inflation; the ability of the Company to produce market-competitive software; cost of capital and capital requirements; the Company’s ability to attract and retain key personnel; the impact of possible cybersecurity incidents on the Company’s business; existing and possible litigation and legal liability in the course of operations and the Company’s ability to resolve such litigation; governmental and public policy changes, including but not limited to legislative and administrative law and rule implementation or change; the impact of recently issued accounting standards on the Company’s consolidated financial statements; the availability of financing in the amounts, at the times, and on the terms necessary to support the Company’s future business; and the other risks identified in Part II, Item 1A of this report, under the heading “Risk Factors.”

Previous wording

The Company’s network solutions services are designed to reduce the price paid by its customers for medical services rendered in workers’ compensation cases, automobile insurance policies, and group health insurance policies. The network solutions services offered by the Company include automated medical fee auditing, preferred provider management and reimbursement services, retrospective utilization review, facility claim review, professional review, pharmacy services, directed care services, Medicare solutions, clearinghouse services, independent medical examinations, and inpatient medical bill review. Network solutions services also includes revenue from the Company’s directed care network (known as CareIQ), including imaging, translation and transportation, physical therapy, and durable medical equipment.

Current wording

The Company’s network solutions services are designed to reduce the price paid by its customers for medical services rendered in workers’ compensation cases, automobile insurance policies, and group health insurance policies. The network solutions services offered by the Company include automated medical fee auditing, preferred provider management and reimbursement services, retrospective utilization review, facility claim review, professional review, pharmacy services, directed care services, Medicare solutions, clearinghouse services, independent medical examinations, and inpatient medical bill review. Network solutions services also includes revenue from the Company’s directed care network (known as CareIQ), including imaging, physical therapy, durable medical equipment, and translation and transportation.

Previous wording

In addition to its network solutions services, the Company offers a range of patient management services, which involve working one-on-one with injured employees and their various healthcare professionals, employers and insurance company adjusters. Patient management services include claims management and all services sold to claims management customers, case management, 24/7 nurse triage, utilization management, vocational rehabilitation, and life care planning. The services are designed to monitor the medical necessity and appropriateness of healthcare services provided to workers’ compensation and other healthcare claimants and to expedite the return to work. The Company offers these services on a stand-alone basis, or as an integrated component of its medical cost containment services. Patient management services include the processing of claims for self-insured payors with respect to property and casualty insurance.

Current wording

In addition to its network solutions services, the Company offers a range of patient management services, which involve working one-on-one with injured employees and their various healthcare professionals, employers and insurance company adjusters. Patient management services include claims management and all services sold to claims management customers, case management, 24/7 nurse triage, utilization management, vocational rehabilitation, and life care planning. The services are designed to monitor the medical necessity and appropriateness of healthcare services provided to workers’ compensation and other healthcare claimants and to expedite return to work. The Company offers these services on a stand-alone basis, or as an integrated component of its medical cost containment services. Patient management services include the processing of claims for self-insured payors with respect to property and casualty insurance.

Previous wording

The Company’s management is structured geographically with regional vice presidents who are responsible for all services provided by the Company within their particular region and are responsible for the operating results of the Company in multiple states. These regional vice presidents have area and district managers who are also responsible for all services provided by the Company in their given area and district.

Current wording

The Company’s management is structured geographically with regional vice presidents who are responsible for all services provided by the Company within his or her particular region and responsible for the operating results of the Company in multiple states. These regional vice presidents have area and district managers who are also responsible for all services provided by the Company in their given area and district.

Previous wording

The Company’s revenues increased to $228.0 million in the quarter ended December 31, 2024, from $202.3 million in the quarter ended December 31, 2023, an increase of $25.7 million, or 12.7%. This increase resulted from an increase in patient management and network solutions activity with existing and new customers.

Current wording

The Company’s revenues increased to $234.7 million in the quarter ended June 30, 2025, from $211.7 million in the quarter ended June 30, 2024, an increase of $23.0 million, or 11%. This increase resulted primarily from an increase in patient management and network solutions activity with new customers.

Previous wording

Cost of revenues increased to $175.1 million in the quarter ended December 31, 2024, from $160.1 million in the quarter ended December 31, 2023, an increase of $15.0 million, or 9.3%. This increase was primarily due to the increase of 12.7% in revenue mentioned above.

Current wording

Cost of revenues increased to $178.0 million in the quarter ended June 30, 2025, from $163.6 million in the quarter ended June 30, 2024, an increase of $14.4 million, or 9%. This increase was primarily due to the increase of 11% in revenue mentioned above.

Previous wording

General and administrative expense increased to $22.1 million in the quarter ended December 31, 2024, from $19.8 million in the quarter ended December 31, 2023, an increase of $2.3 million, or 11.4%. The increase in general and administrative expense was primarily due to the increase in total revenues of 12.7%. General and administrative expense in the quarter ended December 31, 2024 consisted of approximately 10% of revenues. The Company expects general and administrative expense in future quarters to remain between 9% and 11% of revenues.

Current wording

General and administrative expense increased to $21.5 million in the quarter ended June 30, 2025, from $20.1 million in the quarter ended June 30, 2024, an increase of $1.4 million, or 7%. The increase in general and administrative expense was primarily due to the increase in total revenues of 11%. General and administrative expense in the quarter ended June 30, 2025 consisted of approximately 9% of revenues. The Company expects general and administrative expense in future quarters to remain between 9% and 11% of revenues.

Previous wording

Diluted weighted average common and common equivalent shares were approximately 52.0 million shares for each of the quarters ended December 31, 2024 and 2023, with an increase of 60,000 shares from the quarter ended Decmeber 31, 2023.

Current wording

Diluted weighted average common and common equivalent shares were approximately 51.9 million shares for each of the quarters ended June 30, 2025 and 2024, with a decrease of 27,000 shares from the quarter ended June 30, 2024.

Previous wording

Diluted earnings per share increased to $0.46 per share in the quarter ended December 31, 2024, from $0.33 per share in the quarter ended December 31, 2023, an increase of $0.13 per share, or 39.4%. The increase in diluted earnings per share was primarily due to an increase in net income.

Current wording

Diluted earnings per share increased to $0.52 per share in the quarter ended June 30, 2025, from $0.42 per share in the quarter ended June 30, 2024, an increase of $0.10 per share, or 24%. The increase in diluted earnings per share was primarily due to an increase in net income.

Previous wording

The Company’s cost of revenues consists of direct expenses, which are expenses directly attributable to the generation of revenue, and indirect costs, which are costs incurred to support the operations in the field offices that generate the revenue. Direct expenses primarily include (i) case manager and bill review analysts’ salaries, along with related payroll taxes and fringe benefits, and (ii) expenses associated with independent medical examinations, prescription drugs, MRIs, physical therapy, and durable medical equipment providers. Most of the Company’s revenue is generated in offices that provide both patient management services and network solutions services. The remaining revenue is generated in the field. Approximately 33% of the costs incurred in the field are considered field indirect costs. The largest of the field indirect costs are (i) manager salaries and bonuses, (ii) account executive base pay and commissions, (iii) salaries of administrative and clerical support, field systems personnel and PPO network developers, along with related payroll taxes and fringe benefits, and (iv) office rent.

Current wording

The Company’s cost of revenues consists of direct expenses, which are expenses directly attributable to the generation of revenue, and indirect costs, which are costs incurred to support the operations in the field offices that generate the revenue. Direct expenses primarily include (i) case manager and bill review analysts’ salaries, along with related payroll taxes and fringe benefits, and (ii) expenses associated with independent medical examinations, prescription drugs, MRIs, physical therapy, and durable medical equipment providers. Most of the Company’s revenue is generated in offices that provide both patient management services and network solutions services. The remaining revenue is generated in the field. Approximately 32% of the costs incurred in the field are considered field indirect costs. The largest of the field indirect costs are (i) manager salaries and bonuses, (ii) account executive base pay and commissions, (iii) salaries of administrative and clerical support, field systems personnel and PPO network developers, along with related payroll taxes and fringe benefits, and (iv) office rent.

Previous wording

Cost of revenues increased to $175.1 million in the three months ended December 31, 2024, from $160.1 million in the three months ended December 31, 2023, an increase of $15.0 million, or 9.3%. The increase in cost of revenues was primarily due to the increase in total revenues of 12.7%. Additionally, there was an increase in salaries of 9.4% resulting from increased average headcount of 5.5%. Headcount increased to help manage the increase in new and existing business volume.

Current wording

Cost of revenues increased to $178.0 million in the three months ended June 30, 2025, from $163.6 million in the three months ended June 30, 2024, an increase of $14.4 million, or 9%. The increase in cost of revenues was primarily due to the increase in total revenues of 11%. Additionally, there was an increase in salaries of 4.2% resulting from increased average headcount of 3.9%. Headcount increased to help manage the increase in new and existing business volume.

Previous wording

For the three months ended December 31, 2024, general and administrative expense consisted of approximately 44% of corporate systems costs, which include the corporate systems support, implementation and training, rules engine development, national IT strategy and planning, depreciation of hardware costs in the Company’s corporate offices and backup data center, the Company’s nationwide area network, and other systems related costs. All IT-related costs managed by the corporate office are recorded under general and administrative expense whereas the field IT-related costs are included in the cost of revenues. The remaining general and administrative expense consists of national marketing, national sales support, corporate legal, corporate insurance, human resources, accounting, product management, new business development, and other general corporate expenses.

Current wording

For the three months ended June 30, 2025, general and administrative expense consisted of approximately 46% of corporate systems costs, which include the corporate systems support, implementation and training, rules engine development, national IT strategy and planning, depreciation of hardware costs in the Company’s corporate offices and backup data center, the Company’s nationwide area network, and other systems related costs. All IT-related costs managed by the corporate office are recorded under general and administrative expense whereas the field IT-related costs are included in the cost of revenues. The remaining general and administrative expense consists of national marketing, national sales support, corporate legal, corporate insurance, human resources, accounting, product management, new business development, and other general corporate expenses.

Previous wording

General and administrative expense increased to $22.1 million in the three months ended December 31, 2024, from $19.8 million in the three months ended December 31, 2023, an increase of $2.3 million, or 11.4%. The increase in general and administrative expense was primarily due to the increase in total revenues of 12.7%. General and administrative expense in the quarter ended December 31, 2024, equaled approximately 10% of revenues. The Company expects future quarters of general and administrative expense will remain at approximately 9% to 11% of revenues.

Current wording

General and administrative expense increased to $21.5 million in the three months ended June 30, 2025, from $20.1 million in the three months ended June 30, 2024, an increase of $1.4 million, or 7%. The increase in general and administrative expense was primarily due to the increase in total revenues of 11%. The increase in general and administrative expense was due to an increase in legal and insurance expenses. General and administrative expense in the quarter ended June 30, 2025, equaled approximately 9% of revenues. The Company expects future quarters of general and administrative expense will remain at approximately 9% to 11% of revenues.

Previous wording

Income tax provision increased to $7.0 million in the three months ended December 31, 2024, from $5.3 million in the three months ended December 31, 2023, an increase of $1.8 million, or 33.5%. Income before income tax provision increased to $30.8 million in the three months ended December 31, 2024 from $22.4 million in the same period in the prior year, an increase of $8.4 million, or 37.7%. The effective tax rate was 22.8% for the three months ended December 31, 2024 compared to 23.6% in the same period in the prior year. The effective tax rate is less than the statutory tax rate primarily due to the impact of stock option exercises.

Current wording

Income tax provision increased to $8.0 million in the three months ended June 30, 2025, from $6.5 million in the three months ended June 30, 2024, an increase of $1.6 million, or 25%. Income before income tax provision increased to $35.3 million in the three months ended June 30, 2025 from $28.0 million in the same period in the prior year, an increase of $7.2 million, or 26%. The effective tax rate was 23% for the three months ended June 30, 2025 and 2024. The effective tax rate was less than the statutory tax rate primarily due to the impact of stock option exercises.

Previous wording

The Company has historically funded its operations and capital expenditures primarily from cash flow from operations, and to a lesser extent, proceeds from stock option exercises. Working capital increased to $166.4 million as of December 31, 2024 from $117.7 million as of March 31, 2024, an increase of $48.7 million. Cash and cash equivalents increased to $162.9 million as of December 31, 2024 from $105.6 million as of March 31, 2024, an increase of $57.4 million. This is primarily due to the increase in net income, and to a lesser extent, a decrease in spending to repurchase shares of the Company's common stock under its stock repurchase program.

Current wording

The Company has historically funded its operations and capital expenditures primarily from cash flow from operations, and to a lesser extent, proceeds from stock option exercises. Working capital increased to $186.4 million as of June 30, 2025 from $182.7 million as of March 31, 2025, an increase of $3.8 million. Cash and cash equivalents increased to $202.0 million as of June 30, 2025 from $170.6 million as of March 31, 2025, an increase of $31.4 million. This was primarily due to the increase in net income.

Previous wording

As of December 31, 2024, the Company had $162.9 million in cash and cash equivalents, invested primarily in short-term, interest-bearing, highly liquid investment grade securities with maturities of 90 days or less.

Current wording

As of June 30, 2025, the Company had $202.0 million in cash and cash equivalents, invested primarily in short-term, interest-bearing, highly liquid investment grade securities with maturities of 90 days or less.

Previous wording

The Company faces pricing pressures resulting from its competitor's competitive prices. The Company is also impacted by rising costs for certain inflation-sensitive operating expenses such as labor, employee benefits, and facility leases. The Company believes inflation could have a material impact to pricing and operating expenses in future periods due to the state of the economy and current inflation rates.

Current wording

The Company faces pricing pressures due to the competitive pricing of its competitors. The Company is also impacted by rising costs for certain inflation-sensitive operating expenses such as labor, employee benefits, and facility leases. The Company believes inflation could have a material impact to pricing and operating expenses in future periods due to the state of the economy and current inflation rates.

Previous wording

Net cash provided by operating activities increased to $104.4 million in the nine months ended December 31, 2024, from $84.0 million in the nine months ended December 31, 2023, an increase of $20.4 million. The increase in cash flow from operating activities was primarily due to the increase in net income.

Current wording

Net cash provided by operating activities increased to $55.0 million in the three months ended June 30, 2025, from $40.4 million in the three months ended June 30, 2024, an increase of $14.6 million. The increase in cash flow from operating activities was primarily due to the increase in net income, as well as an increase in accrued payroll due to the timing of the Company's bi-weekly payroll.

Previous wording

Net cash flow used in investing activities increased to $27.1 million in the nine months ended December 31, 2024, from $19.2 million in the nine months ended December 31, 2023, an increase of $7.9 million. The Company increased its spending primarily on developed software, offset by a reduction in its spending on furniture and leasehold improvements as the Company reduces its lease footprint.

Current wording

Net cash flow used in investing activities increased to $15.5 million in the three months ended June 30, 2025, from $7.7 million in the three months ended June 30, 2024, an increase of $7.8 million. The Company increased its spending primarily on developed software and on purchase of software license under finance agreement.

Previous wording

Net cash flow used in financing activities decreased to $19.9 million for the nine months ended December 31, 2024, from $29.1 million for the nine months ended December 31, 2023, a decrease of $9.2 million. The decrease in net cash used in financing activities was primarily due to a decrease in spending on share repurchases to $28.6 million for the nine months ended December 31, 2024, from $36.5 million for the nine months ended December 31, 2023, offset by stock option exercises increasing to $8.3 million for the nine months ended December 31, 2024, from $7.1 million for the nine months ended December 31, 2023. The Company has historically used cash provided by operating activities and from the exercise of stock options to repurchase stock. The Company expects that it may use a portion of its cash balance to repurchase additional shares of its common stock under its stock repurchase program in the future; however, there can be no assurance that any further stock repurchases will be made.

Current wording

Net cash flow used in financing activities increased to $8.1 million for the three months ended June 30, 2025, from $6.4 million for the three months ended June 30, 2024, an increase of $1.7 million. The increase in net cash used in financing activities was primarily due to stock option exercises decreasing to $1.5 million for the three months ended June 30, 2025, from $3.1 million for the three months ended June 30, 2024. The Company has historically used cash provided by operating activities and from the exercise of stock options to repurchase stock. The Company expects that it may use a portion of its cash balance to repurchase additional shares of its common stock under its stock repurchase program in the future; however, there can be no assurance that any further stock repurchases will be made.

Previous wording

The Company’s significant accounting policies which have the greatest potential impact on its consolidated financial statements are more fully described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of its Annual Report on Form 10-K for the fiscal year ended March 31, 2024 (the “Annual Report”), filed with the SEC on May 24, 2024. There have been no material changes to the critical accounting policies disclosed in that certain Annual Report. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States of America (“GAAP”), with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting an available alternative would not produce a materially different result. Actual results could differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

Current wording

The Company’s significant accounting policies and estimates which have the greatest potential impact on its consolidated financial statements are more fully described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of its Annual Report on Form 10-K for the fiscal year ended March 31, 2025 (the “Annual Report”), filed with the SEC on May 23, 2025. There have been no material changes to the critical accounting policies and estimates disclosed in that certain Annual Report. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States of America (“GAAP”), with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting an available alternative would not produce a materially different result. Actual results could differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.